Footsie Fortunes

IF YOU think the Footsie is about to head down, then you're with the majority of traders. And ironically that's just why we've seen the recent continued strength.

For the last few weeks just about everyone thought the UK's blue chip index would dive, resulting in a drastic short-squeeze up. But that's about to change ...

Last weekend the Sunday newspapers were full of optimistic rhetoric, with many expecting the Footsie quickly to breach 5000. As soon as enough traders buy into this story and buy back their short positions, the index will start to quiver.

But the market will probably not fall just yet. We've already seen that it's going to take a real shift in sentiment to reverse the Footsie rise. Even last week's DOW drop of over 200 points didn't deter our Footsie.

The UK and the US markets have for the moment decoupled. So most traders will not go short until that situation changes. The problem as ever is timing - the market will turn on a sixpence and we'll need to act quickly. So what should we look out for?

A key technical price is the Fibonacci 4680 level. As the market climbed higher, this was a target for many traders, and still acts as an important level. As such, a convincing break and close beneath 4680 would signal that sentiment has turned to negative.

Currently trading at 4670, the Footsie's right on the edge of that level now. Watch this space!

• Footsie Fortunes is written by William Ackerman of Quantigma - a firm specialising in tools for technical analysis. For more on technical analysis, go to Quantigma.com

And if you'd like to hear William's latest Footsie analysis, you can go along to his FREE charting seminar on 19 October, at 6pm. For details and reservations, please email sue@quantigma.com